When interest rates start to go up, investors worry about the value of their higher yield dividend stocks. A defense against higher interest rates is to own dividend stocks that will grow the dividend payments. The challenge is to know in advance which stocks will make a higher dividend announcement before the rest of the market finds out.

Real estate investment trusts (REITs) pay attractive current yields and regularly increase their dividend rates. I maintain a database of about 140 REITs, out of which about 100 have histories of dividend growth. Most of these companies increase the quarterly dividend once a year, and then pay the new rate for the next four quarters.

Even though individual REITs increase their dividends just once a year, those announcements are spread across almost every month of the year. To capture those share price gains, you want to buy shares a few weeks to a month before the next dividend increase announcement is published. Now in mid-July, it is a great time to look at those REITs that should increase dividends in August.

Here are three REITs from my database that historically have boosted their payouts in August.

Federal Realty Investment Trust (NYSE: FRT) is a $9 billion market cap REIT that owns, operates, and redevelops high quality retail real estate in the country’s best markets. FRT has increased its dividend for 50 consecutive years, the longest growth streak of any REIT.

Over the last 5 years, the average annual dividend increase has been 6.55%. Last year the dividend was increased by 2.0%. Based on management guidance, an increase close to the 5% annual average is in the cards for this year. The company announces its new dividend rate in early August. The ex-dividend date will be in mid-September with payment about a week later.

The FRT share price is down by 4% over the last year. This is a very high-quality REIT currently on sale. The stock yields 3.25%.

Eastgroup Properties Inc (NYSE: EGP) is a $3.3 billion market value REIT that focuses on development, acquisition and operation of industrial properties in major Sunbelt markets throughout the United States with an emphasis on the states of Florida, Texas, Arizona, California and North Carolina. Industrial properties is currently one of the best performing real estate sectors.

The company has increased its dividend for 22 of the last 25 years, including the last six in a row. Last year the payout was increased by 3.3%. This year my forecast is for a 5% to 7% increase. The new dividend rate should be announced in late August or early September, with a mid-September ex-dividend date and end of the month payment date.

EGP yields 2.7%.

Healthcare Trust of America, Inc. (NYSE: HTA) is a $5.4 billion REIT that acquires, owns and operates medical office buildings. The company reduced its dividend in 2012 and 2013, which was followed by small increases in each of the next four years. Last year the dividend was bumped up by 1.7% which is comparable to the increase of the previous year.

In 2017, the funds available for distribution per share increased by 1.2%, and for the 2016 first quarter, FAD per share was flat compared to a year earlier. Management has been very conservative with the dividend growth and I expect a small increase comparable to the last couple of years.

Last year the new dividend rate was announced in early August, with an end of September ex-dividend date and early October payment date.

Earlier this week, I visited my old stomping grounds in Washington, D.C. to cover a pair of Congressional hearings about cryptocurrencies.

If you’ve never been to a Congressional hearing, you should try to attend one. They’re actually open to the public. And there’s no need to sign up or get tickets. But show up early! Seating is extremely limited. At the House Committee on Agriculture, there’s room for about 25 spectators – not including a press table that seats about six reporters (that’s where I was). At the House Financial Services Committee, there’s room for about a dozen spectators. The remaining dozen chairs are reserved for Congressional staff and reporters.

I’ve covered my share of House and Senate hearings – and it never gets old. The rooms that hold these meetings are impressive, awe-inspiring and intimidating. And that’s by design.

The witnesses testifying before Congress are typically the smartest, most accomplished professionals in their field. Members of Congress are not usually described that way.

That’s why the legislators sit on raised platforms and desks while the witnesses testifying before them sit at the bottom of the room, staring up at the bright lights and people in power. It’s a power play – a not-so-subtle reminder that it doesn’t matter how rich or accomplished you are. In that moment, you are answering to Congress.

If you think that such an obvious and dramatic power play wouldn’t rattle truly accomplished people, think again. As I talked to the crypto experts who testified on Wednesday, their reactions ranged from “that was terrifying” to “well, that could have gone worse.”

So how did the “crypto double-header” go on Wednesday? Actually, way better than expected.

For the first time, there seems to be an emerging consensus from the crypto industry about how cryptocurrencies should be regulated. Even better, the suggested framework was either tacitly accepted or (at worst) unchallenged by the politicians in attendance.

In oral and written testimony to the Agriculture Committee, Perkins Coie Managing Partner Lowell Ness outlined a two-phase approach to regulating cryptocurrencies (emphasis mine):

1. Pre-Functionality – Until the token achieves full functionality, offers and sales of tokens would generally constitute investment contract type securities under Howey, unless a reasonable purchaser is purchasing with consumptive intent. In this case, the token should generally be treated as a security unless use of the token (as opposed to resale) is reasonably certain.
2. Full Functionality – Once the token achieves full functionality, offers and sales of tokens would generally not constitute investment contracts under Howey. Software networks, however, generally require ongoing updates and upgrades, so it may be appropriate to create limited but ongoing investor protections.

This regulatory approach to cryptocurrencies is both innovative and remarkably practical. It allows for cryptocurrencies to be defined as securities (and regulated by the SEC) when they’re being created and developed. Once the development phase is over, so is the “third party” work that adds value to the coin (that’s the Howey test at play). At that point, the cryptocurrency becomes a commodity and can be traded without SEC oversight.

This new “hybrid” asset class formalizes a conclusion the SEC has already reached about ethereum. Here’s what the SEC’s corporate finance division director, William Hinman, said about ethereum in a speech in San Francisco (emphasis mine):

And putting aside the fundraising that accompanied the creation of ether, based on my understanding of the present state of ether, the ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions. And, as with bitcoin, applying the disclosure regime of the federal securities laws to current transactions in ether would seem to add little value.

Reading between the lines, the SEC’s view of ethereum matches up pretty nicely with the proposed regulatory scheme. In the minds of the regulatory agency, when ethereum was in its development phase, its initial coin offering (ICO) constituted a sale of securities. The coins were an investment that investors hoped would rise in value based on the work/efforts of a third party. But once ethereum launched, its decentralized nature and usage made it a commodity.

If this seems like pretty technical stuff, well, it is. But it’s also critically important. The marketplace needs clarity and certainty in order to mature. It also needs a light regulatory touch. Anything less than that will stifle growth. And this path potentially walks that tightrope.

In many ways, Wednesday’s hearings mark a sea change in the government’s approach to cryptocurrencies. It was a significant effort to create a positive, constructive framework for cryptocurrencies.

At previous crypto hearings, much of the discussion (by politicians) centered on people using bitcoin for nefarious purposes like money laundering, dodging U.S. sanctions, smuggling drugs and whatever other shady activities people could think of.

And there was still some of that on Wednesday. Over at the House Financial Services Monetary Policy and Trade subcommittee hearing, Rep. Brad Sherman (D-Calif.) said:

There is nothing that can be done with cryptocurrency that cannot be done with sovereign currency that is meritorious and helpful to society. The role of the U.S. dollar in the international financial system is a critical component of U.S. power. It brought Iran to the negotiating table… We should prohibit U.S. persons from buying or mining cryptocurrencies… As a medium of exchange, cryptocurrency accomplishes nothing, except facilitating narcotics trafficking, terrorism and tax evasion.

Sherman wasn’t the only member of Congress who shared that sentiment. Fortunately, it’s both laughable and provably false. As Andreessen Horowitz Managing Partner Scott Kupor noted in the Agriculture Committee hearing, the digital trail created by bitcoin allows law enforcement officials to track down criminals – including Russian hackers.

Sherman (and others like him) is now the outlier in Congress. Even his fellow subcommittee members looked like they were just humoring him because he put on a good a show. Far more prevalent was the approach of Agricultural Committee Chairman Mike Conaway (R-Texas):

For the first time, we have a tool that enables individuals to reliably exchange value in the digital realm, without an intermediary. We can have assets that exist – and can be created, exchanged and consumed – in digital form. The promise of being able to secure property rights in a digital space may fundamentally change how people interact with one another. This technology holds the potential to bring enormous benefits to each of us, if we are willing to give it the space to grow. Providing a strong, clear legal and regulatory framework for digital assets is essential.

We’ve moved from the “bitcoin is bad” era to the bitcoin acceptance era. That’s a huge step forward. Let’s celebrate that before we think about the next step – getting Congress to pass crypto-friendly legislation.

Good investing,

Vin Narayanan

Senior Managing Editor, Early Investing

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I’ve been thinking a lot about recessions lately.

It’s pretty hard not to, because warnings about recessions are coming from financial pundits and big banks with increasing frequency. Most recently, an economist at Citigroup warned in a research note that a recession was likely to come in the next 18 months, because the US Treasury yield curve is flattening.

This person isn’t a lone wolf.

Many economists, including a lot of wonks at the Federal Reserve, are fiercely debating whether our flattening yield curve is a sign that a recession is around the corner. And the fear is intensifying, since the difference between the yield on the two-year and 10-year Treasuries is a meager 25 basis points, the narrowest in over a decade.

This panic isn’t new—and it’s exactly wrong. For instance, Morgan Stanley was warning investors that a flattening yield curve was a serious risk back in 2015, meaning, in their view, that a recession was likely in the next couple years.

They were wrong.

That year, the world’s GDP rose 3.2%, then rose again, by 3.1%, in 2016, according to the International Monetary Fund. The US didn’t do too badly, either, growing 2.6% and 1.6% in those years, with additional 2.3% GDP growth in 2017 and over 3% GDP growth expected for 2018.

The economy’s improving growth shows that we aren’t anywhere near a recession, and, as I wrote in a June 20, 2017, article, it signals a great time to buy stocks. (The S&P 500 is up 17% since that article was published.)

Strong stocks and higher GDP growth are a far cry from Morgan Stanley’s warning. “Recessions follow expansions like night follows day,” warned the bank’s chief global strategist of emerging market equities, Ruchir Sharma, at a Bloomberg summit in 2015.

Except they don’t.

Nights follow days at regular intervals governed by the laws of physics. Recessions follow expansions because of human nature, and human nature is impossible to predict. Sharma’s grave warnings from two years ago prove the point.

49 Recessions—and Holding

Where does the seven-year myth come from? Recent history.

In 1969, 1990 and 2008, there were three recessions that were about seven years apart. We also saw a 2001 recession that came a decade after the previous one—near enough to seven years if you’re not looking too closely.

But that’s a misleading selection because we also saw recessions in 1973, 1980 and 1981 that weren’t anywhere near seven years after the preceding one. You could try to fudge the numbers to make them fit, but an even closer look at history shows just how foolish that would be.

Let’s take a look at the full list of every recession in US history.

That’s a long list!

In America’s near 250-year history, there has been no shortage of crises and panics. But the good news is that they’re getting further apart. It’s almost as if the economy is getting more efficient and businesses are getting better at avoiding downturns.

If you lived through 2008, you probably wouldn’t think that things are getting better, but they are. As bad as that crash was, we didn’t have bread lines like we did in the Great Depression; we didn’t have homeless camps in Central Park; and we didn’t have food riots like the Flour Riot of 1837 in New York City.

Of course, things aren’t perfect nowadays, but our downturns tend to be more measured, more controlled and further apart. Take a look at this chart of each recession in US history and the time that elapsed since the previous one:

Notice how the lines tend to get longer over time? That’s because we’re getting smarter about capital markets, fund flows, business cycles and ways to cushion the economy when things get really bad.

That doesn’t mean recessions are destined to happen every seven years, but it does mean that we can expect recessions to be spread even further apart in the future. Maybe someday, recessions will even stop happening altogether.

Life in the Slow(er) Lane

It’s now been nine years since the Great Recession officially ended in June 2009. That isn’t the longest gap we’ve had between recessions (that award goes to the post–dot-com recession of 2001), but I’m betting that the next recession won’t happen until it’s been a bit more than 10 years since the last one ended.

There are a number of reasons why I think the next recession is pretty far off, but they all come from the same starting point: the slow recovery we’ve seen over the last nine years.

Whether you call it “the new normal,” as ex-PIMCO bond genius Mohammad Al-Arian does, or you prefer “secular stagnation,” as Harvard professor and ex-presidential advisor Larry Summers does, everyone has noticed an uncomfortable truth about our economy since the Great Recession: it’s been recovering at a glacial pace.

That slow improvement has resulted in a delayed business cycle and slow growth in consumer spending. It has also caused overall wage growth following the recession to rise at a very slow rate—though it is now starting to increase significantly. That’s not a recessionary trend, but it isn’t a bubble either. It’s ho-hum.

And ho-hum is likely what we’re going to see for a few years to come. Again, not great, but not a recession either.

Steady Gains Ahead

What does ho-hum mean for investors? It means lower returns—but no major downturn.

Slowly, investors have begun to realize that this is a good reason to buy stocks. If you’re going to get lower average annualized returns over the next few years and you’re not going to get a major downturn anytime soon, that means it’s a really good time to buy stocks—especially since many are oversold due to fear mongering and too many individual investors keeping their cash out of the market.

(You could start with the 10 dividend stocks my colleague Brett Owens says are set to double. Click here to read all about them.)

Most retail investors haven’t gotten the memo that this is the new reality of investing, but the stock market has. Take a look at the volatility index known as the VIX. Called the “fear gauge,” this is an indicator of just how scared the market is of a major downturn in the near future. And its average has been trending down ever since the financial crisis began:

Volatility Still Falling

Despite the headlines about volatility rising earlier this year, fear is still going down over the longer term because the market is continually realizing that there are too many safeguards in place, too many checks and balances and too much at stake in the new world economy to let another 2008 happen. That doesn’t mean it won’t, but it does mean it won’t anytime soon.

And without a recession, there’s not going to be a bear market in stocks in the short term, meaning investors need to buy now and watch their portfolios grow. The only trap in today’s new normal is sitting in cash on the sidelines, where rising inflation will eat up your net worth.

I like to look for what are called contrarian investments. That is, trades where Wall Street is piled into one side of the ‘boat’. When this happens, the ‘boat’ has a tendency to ‘capsize’ turning into very large profits for taking the opposite side of the trade that Wall Street is on.

There are several of these trades going on right now including shorting U.S. Treasuries, being long the U.S. dollar, being short commodities, and also shorting overseas markets and using the proceeds to go even longer with even more leverage in the U.S. on favorites like the FANG stocks.

The reason for the latter trade is that Wall Street’s perception is that the tariffs imposed on foreign products will hurt those economies even though history says just the opposite – that the country imposing the tariffs is hurt the most. So what I have done in my personal account is scour the globe for companies that are actually benefiting or may gain from the tariffs imposed by the Administration.

Don’t Ignore ADRs

This really isn’t hard, with many of these type of companies trading right here in the U.S. in the form of American Depository Receipts or ADRs. Some of these are large, well-known companies such as Alibaba (NYSE: BABA). Here is a quick overview of ADRs.

ADRs can be sponsored or unsponsored and have three different levels, depending upon foreign companies’ access to US markets, as well as disclosure and compliance requirements. Level 1 ADRs cannot be used to raise capital and are only traded on the over-the-counter market. Level 2 and Level 3 ADRs are both listed on an established U.S. stock exchange, with Level 3 ADRs having the ability to be used to raise capital.

Most ADRs that trade over-the-counter as easy to spot since the last letter of the five letters in their symbol is always a Y. For instance, the food giant Nestle symbol is NSRGY and China’s internet and gaming powerhouse Tencent symbol is TCEHY.

However, the number of ADRs listed in the U.S. has shrunk drastically in recent years. The reason for that lies in the cost of compliance with among other regulations, Sarbanes-Oxley. It is just not cost-effective for companies to spend millions of dollars to comply and then see little daily trading in their ADR thanks to lack of interest in foreign firms by U.S. investors (home bias).

If you do stick with ADRs, the commissions charged you by brokerage firms, such as Charles Schwab, is the same as for U.S. companies – $4.95.

Related: Buy This Export to China That Is Exempt From Tariffs

And if you’re worried about the accounting standards at foreign companies, don’t be. Listed foreign companies follow international accounting standards as set by the IFRS. There are differences between IFRS (International Financial Reporting Standards) and GAAP (Generally Accepted Accounting Principles) standards here in the U.S. But that would be a long, boring discussion we don’t have the time to get into.

Suffice it to say that IFRS standards are very good and better than the pro forma earnings numbers often reported here in the U.S., which I consider to be trash. As Warren Buffett has often pointed out, pro forma earnings often leave out real expenses, such as stock compensation.

Convergence between IFRS and GAAP standards have been a topic of discussion at the SEC and other governmental agencies for years. But interestingly, U.S. officials seems to dragging their feet. Maybe it’s because the U.S. doesn’t always have the highest standards for corporations.

Take Ali Baba (NYSE: BABA), for example. It listed here in the U.S. and not in Hong Kong because the corporate governance rules were less strict here in the U.S. The Hong Kong Exchange frowned upon the company wanting to nominate the majority of the board itself. Although now there is talk Hong Kong will adopt the lower U.S. standards.

Now let me move on and bring you three ADRs I found that are either benefiting from the tariffs or are unaffected. Keep in mind that these are major companies in their home markets that trade millions of shares a day there.

Soybeans Anyone?

One of most prominent retaliations taken against the U.S. was China’s tariffs on U.S. farm products such as soybeans. That immediately make me think of another big agricultural economy that China already bought a lot of products from – Brazil.

One of the largest agricultural companies in Brazil is a company named SLC Agricola SA that does have an ADR with the symbol SLCJY. The ADR is liquid enough for individual investors (I do own it) with trading volume of about 15,000 a day.

The company, founded in 1977, has an English website slcagricola, so it’s easy to get information on it. The company has 16 production sites located in six Brazilian states totaling 404,479 hectares during the 2017/18 crop season. The acreage breakdown is: 230,164 of soybeans, 95,124 of cotton, 76,839 of corn and 2,352 of other crops, such as wheat, corn 1st crop, corn seed and sugarcane.

The ADR has taken off in recent months and is now up 100% year-to-date and 140% over the past year. I’m sure many Brazilian farmers, as well as Agricola shareholders, are thankful tariffs were imposed.

Germany’s Square

Another favorite target seems to be Germany, so I looked to see what I could find there. And I came up with a global leader in the payments space, a company named Wirecard AG that has an ADR with the symbol WCAGY. Its ADR also has decent liquidity with about 10,000 shares traded daily even though it only became available in late 2016.

 Wirecard is one of the fastest growing financial commerce platform that services 36,000 large- and medium-sized merchants and 191,000 small-sized merchants. It had over $106 billion in processed transaction volume worldwide in fiscal year 2017.

The company works together with ApplePay in many European countries. And it bought Citibank’s prepaid card services in North America as well as its merchant acquiring business in the Asia-Pacific region.

Due to its strong organic growth in excess of 25%, management raised its guidance in April for the 2018 fiscal year from 510 million to 535 million euros up to 520 million to 545 million euros. This has not been lost on investors. . . . .

Its ADR is up 60% year-to-date and has soared more than 143% over the past year.

It’s Not Made Here

The final ADR is one that is thinly traded (only a few hundred shares daily). But I wanted to bring it your attention because it makes something that is NOT made in the U.S. meaning that barriers or not, it is an absolute necessity for some firms. Let me explain. . . . .

If you’re having trouble finding some electronic devices, such as a Sony Playstation 4, it is likely due to the ongoing global shortage of MLCCs, or multilayer ceramic capacitors. You may never see these capacitors, which are less than one millimeter on each side. But they are a crucial component of your smartphone as well as your car. They help control the flow of electricity and store power for semiconductors, without which no electronic device will function.

The market for MLCCs is dominated by Asian manufacturers with just three companies controlling 60% of the market – Korea’s Samsung Electro-Mechanics and two Japanese firms, Murata Manufacturing and Taiyo Yuden. Both Japanese companies have ADRs trading in the U.S. with the symbols MRAAY and TYOYY respectively.

Murata has more liquidity, with over 18,000 shares traded daily versus just a few hundred shares. But Taiyo Yuden is by far the better performer. Even before the shortage occurred, Taiyo Yuden saw its sales of capacitors increase by over 21% in its last fiscal year.

That helped send its stock skyward. Its ADR is up 87% over the past year, with most of the performance occurring this year – up 82.5% year-to-date – as the realities of a global shortage of MLCCs have set in.

There you have it – just three of the overseas companies that either are benefiting or will be unaffected by tariffs. There are plenty more too, so please do not be afraid to put a little bit of your portfolio into stocks outside the U.S.

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